London Session Forex Recap – September 29, 2015

  • German Import Price Index m/m: -1.5% actual v.s. -1.4% expected, -0.7% previous
  • Spanish Flash CPI y/y: -0.9% actual v.s. -0.6% expected, -0.4% previous
  • U.K. M4 Money Supply m/m: -0.4% actual v.s. 1.0% previous
  • U.K. Net Consumer Credit: £0.9B actual v.s. £1.2B expected, £1.2B previous
  • U.K. Mortgage Approvals: 71.0K actual v.s. 69.8K expected, 69.0K previous
  • U.K. CBI Realized Sales: 49 actual v.s. 29 expected, 24 previous
  • Euro Zone Consumer Sentiment: unchanged at -7.1 as expected
  • German Flash CPI m/m: -0.2% actual v.s. -0.1% expected, 0.0% previous
  • German Flash HICP m/m: -0.3% actual v.s. -0.1% expected, 0.0% previous
  • BOE Guv’nah Mark Carney has a speech later

Asian forex traders and other market participants may have been a gloomy bunch, but European traders were certainly more optimistic since risk appetite managed to somehow make its way back into the markets, with the DAX slightly up by 0.30% to 9,510.80. Most commodities were also in the green after being routed earlier, with Brent crude oil up by 0.76% to $47.70 per barrel.

There’s even a good chance that risk appetite could carry over into the upcoming U.S. session since U.S. equity futures were in the green too, with the S&P 500 futures up by 0.43% to 1,880.00 and NASDAQ futures up by 0.48% to 4,113.88 during the forex session.

In the realm of forex, the returning risk-on sentiment allowed the higher-yielding currencies to stage a rally against the safe-havens. Among the higher-yielders, the Kiwi managed to dominate ALL its forex rivals, even though there weren’t any direct catalysts for the Kiwi’s overwhelming strength, which was rather strange since New Zealand (and therefore the Kiwi) is fundamentally weak and Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler has been warning that “some further easing in the OCR seems likely.”

Perhaps forex traders were now more optimistic on the Kiwi because of the RBNZ’s somewhat upbeat outlook in the annual report which was released yesterday. In the said report, Governor Wheeler also stressed that New Zealand’s economy “has performed much better than many advanced economies in recent years.”

NZD/USD is up by 52 pips (+0.83%) to 0.6354, NZD/CAD is up by 55 pips (+0.66%) to 0.8517, NZD/JPY is up by 89 pips (+1.19%) to 76.16

The high-yielding pound got some buyers too, but it didn’t perform as well as the comdolls. In fact, it was the weakest among the higher-yielding currencies, probably because the economic data points released during the forex session were mixed. It’s also possible that forex traders were avoiding the pound ahead of Bank of England (BOE) Guv’nah Mark Carney’s speech for later.

GBP/USD is down by 6 pips (-0.04%) to 1.5159, GBP/AUD is down by 140 pips (-0.64%) to 2.1692, GBP/NZD is down by 211 pips (-0.89%) to 2.3841

Among the safe-havens, the Japanese yen got smacked around the hardest. The only possible catalyst that came out shortly before the yen took a major tumble was the statement from Etsuro Honda, who happens to be one of the architects of “Abenomics” and is currently a special adviser in Prime Minister Shinzo Abe’s cabinet, so he knows his stuff.

According to Honda, “the Japanese economy is in a static situation,” and he sees “more and more evidence that the Bank of Japan may need additional QQE.” Not exactly a good sign for the yen, huh? After all, more stimulus means a potentially weaker yen.

USD/JPY is up by 47 pips (+0.40%) to 119.92, CHF/JPY is up by 28 pips (+0.23%) to 123.33, GBP/JPY is up by 97 pips (+0.53%) to 182.12

As for the euro, it got hammered by a string of mostly disappointing data, including poor inflation from Germany and Spain, which could potentially mean a poor inflation reading for the entire euro zone.

EUR/USD is down by 47 pips (-0.42%) to 1.1220, EUR/NZD is down by 217 pips (-1.22%) to 1.7652, EUR/AUD is down by 156 pips (-0.97%) to 1.6062

The forex calendar for the upcoming afternoon London/morning U.S. session has a lot in store for us, so buckle up.

Up first, at 1:30 pm GMT, we’ll get the readings for Canada’s industrial product price index (-0.5% expected, 0.7% previous) and raw materials price index (-7.5% expected, -5.9% previous). Do note that both inflation indicators are expected to deteriorate, which could mean more deflationary pressure on the Canadian economy (and a weaker Loonie).

Also at 1:30 pm GMT, forex traders will get the reading for U.S. goods trade balance (-$57.3B expected, -$59.1B previous). Take note that the trade deficit in goods is expected to contract a bit, so there’s also a good chance that Uncle Sam’s overall trade deficit is gonna contract, and that’s a good thing.

After that, at 2:00 pm GMT, we’ll get the reading for the S&P Case-Shiller home price index (5.15% expected, 5.00% previous) followed by U.S. consumer confidence (97.0 expected, 101.5 previous) at 3:00 pm GMT. Do note that the latter is considered a top-tier item, and it’s expected to deteriorate, so be careful if you have long positions or orders on the Greenback.

Finally, at around 8:40 pm GMT, we’ll hear BOE Guv’nah Mark Carney speak in London. You know the drill: keep an ear out for any juicy updates on the future direction of monetary policy or shifts in economic outlook. Also, keep an eye on the pound since it may have a reaction, especially if Carney says something unexpected. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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